Do initial stop-losses stop losses?
Research output: Contribution to journal › Article › peer-review
A great many traders use stop-loss rules in their everyday trading. In addition, during periods of high volatility, many traders attempt to protect their downside by moving their stops closer to the price action. However, there appears to be little real justification for doing this. There is a shortage of evidence that demonstrates that stops are actually providing the benefits that traders believe they are. This paper is an empirical study of the use of stops within a defined trading strategy. The methodology used within this paper can easily be ported to any individual traders’ strategy. In the specific case studied in this paper, the results suggest that initial stops degrade long-term portfolio performance.
| Original language | English |
|---|---|
| Pages (from-to) | 5-8 |
| Number of pages | 4 |
| Journal | The Australasian Journal of Applied Finance |
| Issue number | 4 |
| Publication status | Published - 2008 |